The Firemen’s Pension Scheme (Pension Sharing on Divorce) (Scotland) Order 2001

Explanatory Note

(This note is not part of the Order)

This Order amends, in relation to firefighters in Scotland, the Firemen’s Pension Scheme 1992 (“the 1992 Scheme”), as set out in Schedule 2 to the Firemen’s Pension Scheme Order 1992. The amendments relate to cases where firefighters are divorced, and stem from the pension sharing provisions in the Welfare Reform and Pensions Act 1999 and associated subordinate legislation.

The Order has retrospective effect from 1st December 2000 as authorised under section 26 of the Fire Services Act 1947, as read with sections 12 and 16 of the Superannuation Act 1972. References in the Order to the Secretary of State are to the Secretary of State for Work and Pensions.

Article 3 inserts a new Part N (Pension Sharing) into the 1992 Scheme. The new Part has the following effect:–

• Rule N1 provides that the definition of expressions in respect of Part N are set out in Part 1A of Schedule 1 to the 1992 Order, as inserted by Schedule 1 to this Order, and are additional to the definitions of expressions in Part 1 of Schedule 1 to the 1992 Order. The rule also provides that the provisions in Parts A to M of the 1992 Order are subject to the provisions of Part N.

• Rule N2 provides for pension sharing in respect of a member’s shareable rights under the 1992 Scheme, but excludes any benefit payable to a widow or widower or other dependant of a deceased member.

• Rule N3 provides that, when a relevant pension sharing order comes into effect, the firefighter’s pension rights under the 1992 Scheme become subject to a “pension debit” and the ex-spouse becomes entitled to a “pension credit”.

• Rule N4 prescribes how the pension debit is to be calculated, depending on whether the pension sharing order specifies a percentage, or an amount, to be transferred to the ex-spouse.

• Rule N5 provides for the shareable rights of the firefighter to be reduced in accordance with the pension sharing order.

• Rule N6 provides that, where a pension sharing order has effect, the firefighter’s protected rights and guaranteed minimum pension are subject to the pension debit.

• Rule N7 allows a fire authority to discharge its liability in respect of a pension credit by conferring on the ex-spouse “appropriate rights”, which are rights within the 1992 Scheme to the same value as the pension credit.

• Rule N8 makes provision for the pension credit to be reduced in any case where a fire authority makes a payment to a firefighter under the 1992 Scheme without knowing that it was subject to a pension debit because of a pension sharing order. In such a case, if the cash equivalent of the firefighter’s shareable rights after deduction of the payment is less than the amount of the pension debit, the corresponding pension credit is reduced to the remaining cash equivalent. The effect of this is to restrict, in certain circumstances, the pension credit for which the Scheme is liable.

• Rule N9 requires a fire authority to discharge its liability in respect of a pension credit within a 4 month ‘implementation period'. Broadly, this period begins from the date on which the pension sharing order takes effect or, if later, from the date on which all relevant documents (as set out in the rule) are with the authority.

• In Rule N10, paragraphs (1), (2) and (4) require a fire authority to inform the Occupational Pensions Regulatory Authority (“OPRA”) if the period for implementing a pension sharing order is not met, and also clarify that civil penalties for the breach may be imposed. Paragraph (3) enables OPRA to extend the implementation period in certain circumstances. Paragraphs (5) and (6) refer to cases where an ex-spouse dies before the pension credit liability has been implemented. In such circumstances, provision is made for the fire authority to discharge its liability by paying a death grant equal to the annual rate of the pension which would have become payable to the ex-spouse, multiplied by 2.25.

• Rule N11 sets out the appropriate rights in respect of the pension credit member (the firefighter’s ex-spouse). The credit member’s benefits, which will be treated in a similar way to a deferred pension, are broadly restricted to a pension at age 60 (part of which can be commuted to a lump sum, in the circumstances described in paragraph (4)), and a lump sum death grant. Benefits will be payable on reaching the normal age for a deferred pension under the Scheme (age 60) and may not be further deferred. Provision is made for the benefits to be increased under the Pensions (Increase) Act 1971 (c. 56). Paragraphs (5) to (9) make detailed provision for the commutation of part of the pension, including notifying the fire authority. The lump sum death grant (paragraph 10)) is payable if the pension credit member dies before the age of 60.

• Rule N12 restricts the amount of additional service which the firefighter may purchase in order to replace rights debited. The restricted amount is the amount of service he could have purchased if the pension sharing order had not been made. This restriction is relaxed in respect of moderate earners, i.e. those whose earnings at the date of divorce or annulment do not exceed 25 per cent of the permitted Inland Revenue maximum.

• Rule N13 allows a fire authority to commute under rule B8 (commutation – small pensions) the pension of a firefighter who has been affected by a pension debit. It also allows a fire authority to commute a small pension payable to a pension credit number (as long as that pension is still trivial when aggregated with any other pension payable to the person under the 1992 Scheme).

• Rule N14 prevents a fire authority accepting into the Scheme a transfer of a pension credit from another occupational or personal pension scheme, and also prevents it transferring-out a pension credit.

• Rule N15 allows fire authorities to recover, from the parties involved in the divorce, the costs accrued in administering the pension sharing (as set out in the Pensions on Divorce etc. (Charging) Regulations 2000 (S.I. 2000/1049)). The fire authority has to give notice of its schedule of charges, in advance of the pension sharing order being made.

• Rule N16 provides that a pension credit cannot be aggregated with other Scheme benefits. It also ensures that, where a pension credit member is also an active member of the 1992 Scheme, the pension credit must be disregarded when assessing the length of service in relation to Scheme benefits.

• Rule N17 provides for the pension credit not to be assigned except where required by law.

• Rule N18 provides for calculations relating to pension credits and pension debits to be done in accordance with guidance issued by the Government Actuary.

• Rule N19 specifies which rules of the Scheme apply to pension credit members.

Article 4, along with Schedule 1, inserts into Schedule 1 to the 1992 Scheme a new Part containing definitions of expressions relevant to the pension sharing provisions (Part IA).

Article 5, along with Schedule 2, makes minor and consequential amendments to the 1992 Scheme.